Robinsons Retail Holdings, Inc. (RRHI) Earnings Call Transcript & Summary

Good afternoon, everybody. Thank you for joining us to review Robinsons Retail's unaudited results for the first quarter of this year 2025. I am Gina Dipaling, the company's Investor Relations Officer. The speakers for this call are the following: Stanley Co, our President and CEO; Mylene Kasiban, our CFO; Christine Tueres, the Managing Director of the big formats for the Food segment; Joanne Arceo, the Group General Manager of the Drugstore segment; Celina Chua, the Group General Manager of Robinsons Department Store, Toys R Us [indiscernible] and Spatio; Ted Sogono, the Group General Manager of DIY and Pets; Jovi Santos, the Group General Manager of the Appliance segment. Our Chairman, Robina Gokongwei Pe is also on the call. Last is the agenda for this afternoon's call. We will provide an overview of our financial performance and share key updates across the organization. [Operator Instructions] With that, I will turn you over to Stanley.

Thank you, Gina. Good afternoon, everyone. Here are the highlights of our results for the first quarter of 2025. Consolidated net sales increased by 4.2% to PHP 47.8 billion. Blended same-store sales growth came in at 3%. Gross profit accelerated by 6.2% to PHP 11.6 billion. EBIT increased by 2.7% to PHP 1.9 billion. And net income to parent dropped 85% to PHP 760 million as we booked a onetime gain from the BPI-RBank merger last year. Consolidated net sales came in at PHP 47.8 billion, up by 4.2%. Same-store sales growth accelerated to 3% from flattish growth last year. Growth was supported by additional selling days as Holy Week shifted to April, partially offset by the lack of our 1 day in February this year versus last year as 2024 was a leap year. The absence of an extra day reduced February sales by approximately 3.6% with February SSSG adjusting to 0.8% -- to 4.4% when excluding the leap year impact. The business impact that posted average -- the business units that posted above average growth for the period were drug stores, department stores and specialty stores. Now a deeper look at our P&L. EBIT grew by 2.7% to PHP 1.9 billion, driven by an increased category mix and an improved category mix and continued vendor support, which helped offset the onetime increase in salaries and wages arising from enhanced recognition of our teams and other employee benefits and full quarter effect of the increase in minimum wage last year. Net income attributable to Parent declined to PHP 760 million, primarily due to the high base last year, which included a substantial gain from the BPI-RBank merger. Including onetime items, our earnings increased by 4.9% to PHP 1.2 billion due to higher EBIT and lower interest expense. In terms of segment contributions, the core staple businesses accounted for 81% of total sales and 86% of total EBITDA. Meanwhile, our discretionary formats comprised 19% of total sales and 14% of total EBITDA, respectively. As of March 2025, our store count reached 2,448 comprising 760 Food segment stores, 1,131 drug stores, 50 department stores, 225 DIY stores and 282 specialty stores. Additionally, we have 2,116 franchise TGP stores. Turning you over to [indiscernible] for the Food segment.

The Food segment recorded net sales growth of 3.4% to PHP 29 billion, driven by 3% same-store sales growth, supported primarily by the third consecutive quarter of increased basket size. Gross margin improved by 40 bps to 22.7%, driven by higher penetration of private label and imported products as well as higher vendor support. EBITDA grew by 3.3% to PHP 2.4 billion, broadly in line with top line growth as gross margin expansion offset the increase in personnel costs. Next speaker will be Joanne for the Drugstore segment.

Good afternoon. The Drugstore segment posted 7.5% increase in net sales, driven by 3.2% same-store sales growth and the contribution from 59 [indiscernible] stores. Gross margin expanded by 140 bps to 22.3%, supported by stronger vendor funding and increased penetration of house brands. EBITDA rose by 7.1% to PHP 806 million as the solid top line growth helped offset the impact of higher operating expenses related to store expansion and increased leasing costs associated with new systems and facilities. Turning over to Celina.

Net sales for the Department Store segment rose by 5.6%, driven by strong same-store sales of 5%. Growth was supported by strong performance of shoes, beauty and apparel supported by marketing events such as shoes and bags, travel fair and international [indiscernible]. Gross margin remained stable at 31.4% as promotions were offset by higher vendor support. EBITDA increased by 3.5% due to the segment's strong top line performance. Turning you over to Ted for the DIY segment.

The DIY segment remained challenged during the quarter, posting negative SSSG of 1.9%. This was primarily due to supply chain issues, which affected store productivity and went through merchandise congestion [ trend ]. Despite the top line pressure, gross margin expanded by 50 bps to 33.7%, supported by the introduction of new items and higher [ ECBs ] . However, the improvement in gross margin was offset by higher operating expenses, resulting in a decline in EBITDA to PHP 220 million. Turning you over to Jovi.

Good afternoon. The Specialty segment net sales rose by 5% to PHP 3.3 billion, supported by the reversal of SSSG to positive 5.1%, led by double-digit growth in toys, mass merchandise and lifestyle sneakers. Toys grew on strong demand for trading cards, active figures and blind boxes. Mass merchandise recovered as stock availability normalized, while lifestyle sneakers benefited from the successful launch of the on-cloud shoe brand. EBITDA declined to PHP 129 million due to 80 bps gross margin contraction to 28.3%, largely driven by prolonged clearance of phaseout SKUs in Savers following the cessation of corporate sales. All Saver stores were converted to Robinsons Appliances by March 31, 2025, simplifying the Appliance segment's operating model and reducing costs. Improvements are expected in the coming quarters. Mylene?

Thank you. Our cash conversion cycle rose to [ 28.2 days ] in Q1 this year from 25.6 days last year. The increase is due to higher inventory days at 82.1 versus 79.6 in Q1 2024 as well increased stocks of retail products due to strong demand. Moving on to our balance sheet. We are in a net debt position of PHP 11.6 billion as of March where total borrowings were PHP 20.8 billion, mainly due to the acquisition loan for the BPI shares repurchased in January 2023. As of March 2025, our debt related to the BPI share purchase amounted to PHP 10.8 billion. Even with a net debt position, our balance sheet remains healthy with a net debt-to-equity ratio of only 0.12x. ROA and ROE normalized to 3.6% and 6.7%, respectively, due to the absence of the onetime gain from the BPI-RBank merger in company. In terms of CapEx, organic CapEx for all segments in Q1 this year increased to PHP 962 million compared to PHP 846 million in the same period last year. Half of the CapEx was allocated to the Food segment, followed by 20% for drug stores, 18% for specialty, 8% for DIY and 5% for department store. Now I'll turn it over to Stan.

Now allow me to update you on some of our minority investments, namely GoTyme, O!Save and GrowSari. On GoTyme first quarter 2025 results, total customers reached 6.1 million from 2.8 million last year, strengthening its position as one of the fastest-growing digital bank in the Philippines. Transaction count also sustained its growth momentum as the bank continues to scale and total bank kiosks are at 528 and 396 of which are located inside our stores. Wholesale store count in the Philippines stood at 471 as of March 2025, nearly doubled from 238 stores last year. This led to sales increasing by 2.2x to $94 million for the first quarter. Its operations are also supported by 4 distribution centers. Moving on to G2M, the parent company in GrowSari. Total platform value or the total value of all the business lines rose 27% year-on-year to PHP 216 million, driven by the continued growth in coverage and active customers. GrowSari operates in 24 key cities across the country. Let me update you on some key corporate developments across the business. We were recently recognized as one of Asia Pacific's Best Companies of 2025 by Time Magazine in Statista. Ranking 7 out of the 23 companies from the retail, wholesale and consumer goods sector, while we were one of the 29 Philippine companies included in the list of 500 from across the regions. The ranking was based on employee satisfaction, revenue growth and ESG metrics. We were also named as Best Retail company in the Philippines by Finance Asia 2025, Asia's Best Companies Poll, particularly participated in by investors and financial analysts. We have gathered close to 700 attendees for this year's TGP Franchisees Summit, [indiscernible] Franchise appreciation line. We congratulated our franchisees for their achievements and community impact in 2024. Our Food and Drug Store segments held their annual Trade Partners Night in February and March to recognize and thank our trade partners for helping us serve our customers better every day. The Platinum awardees were Coca-Cola Europacific Aboitiz Philippines for the Food segment and Nestle for the Drugstore segment. For our sustainability highlights, we participated in the Carbon Disclosure Project, or CDP, for the first time in 2024 and received a C rating each for climate, forest and water, an encouraging baseline as we build on our environmental strategies rating, ratings from A to B minus. We also expanded our food rescue program to 105 stores in 2024 from 37 in 2023, recovering over 109,000 kilos of surplus food since 2023, translating to 458,000 meals served, nearly 300,000 kilos of carbon emission avoided and over PHP 2 million in disposals -- cost savings. This is our guidance for full year 2025. We are looking at the net store additions of 130 to 170 with bulk of new stores coming from food and drug stores. Meanwhile, we are aiming for a blended SSSG of 2% to 4%. Our gross margins, we are guiding for a 20 to 30 bps expansion for the year. And finally, we are earmarking PHP 5 billion to PHP 7 billion for organic capital expenditures. This ends our presentation for the first quarter results. We will now open the floor for Q&A session.

Good afternoon. We will first read questions sent via Zoom Q&A facility. But if you would like to ask your questions live, I -- please do so, but please use the raise hand function. We have few questions coming in from the Q&A box. This would be from Bernadine Bautista of JPMorgan. Number one, what is SSSG for supermarkets and CVS in the first quarter?

Okay. The same-store sales growth versus supermarket -- total supermarket is up by 3.4% for the first quarter, while for Uncle John's it's at negative 3.2%.

Next question from [ Nadeem ]. Any divergence in basket size and transaction count trends in the different Food -- business segments? Which formats are showing positive and/or negative basket sizes?

We have seen a good trend in terms of basket size. For the Food segment, basket size is up by 3.7%.

For third question, can you share color on the intensity of supplier support for Food in the first quarter of this year versus fourth quarter 2024? [ Nadeem ] we'll get back to you on this one [indiscernible] the question. Last question from [ Nadeem ] for now. Can you please repeat how sales for SSSG figures will be if we adjust for the timing of [indiscernible] and leap year?

For Feb it should be around 4.4% from 0.8%.

Okay.

I can answer [ Nadeem ] on vendor support. It's up by 13%.

Vendor support is up 13%, just to repeat, in the first quarter relative to last year. Okay. [Operator Instructions] We have a question from [ Paolo Garcia ]. Breakdown for the 1Q SSSG for the various brands or banners of Supermarkets, namely Robinsons Supermarket, Robinsons Easymart Marketplace and Shopwise?

Robinsons Supermarket 3.7% SSSG, Marketplace is at 5.3%, Shopwise at 1%. Robinsons Easymart at 2.1%, Uncle John's as mentioned it's negative 3.2%.

Next question will be from [indiscernible]. He has 2 questions. The first one, how many O!Save stores are you projecting for this year or for FY '25 and for next year, FY 2026? And what is your time line for -- Okay. maybe let's try to answer the first question, which is related to O!Save.

Jonas is on the line. Jonas, would you like to answer?

Sure. Can do that. Yes. So for 2025, we are projecting close to 800 stores by the end of the year. And for 2026, we are projecting more than 1,100 stores.

Thank you, Jonas. Then Brian's second question is -- this is for -- on GoTyme. So what is your time line for the profitability of GoTyme? And what are your near-term targets for this business going forward?

I think GoTyme is looking at -- to breakeven in the second half of 2026.

We have a few follow-up questions from [ Nadeem ]. This is on DIY. Can you please elaborate on the supply chain issues and merchandise congestion trends that were mentioned earlier? And what exact OpEx items drive EBITDA margins for this BU?

I think for the supply chain issues because we are looking for more efficient operator of our DC. So we changed the operator and it affected the efficiency, the speed of delivering goods to our stores. I guess the [ teams ] -- what affected our OpEx is more on the supply chain because of -- because we want to be more efficient. So we have a higher operating expense.

Next question will be from Priya. Can you give us some color on the consumption segments that saw maximum and minimum interest? Perhaps maybe Priya is referring to the demand trends we're seeing across our different segments.

I think the premium banners are seeing maximum interest considering the higher same-store sales growth. In the case of Food, it will be the marketplace.

Another question from the JPMorgan team. This is on O!Save. So on O!Save, what is SSSG in the first quarter, our basket size and transaction counts trending for this quarter? And which areas are you targeting for new O!Save branches or stores? And how is competition faring with -- especially for locating new sites? You want to answer?

All right. So our SSSG remains relatively stable at between 25% and 35%. That primarily comes from increased transaction counts. Our basket size remains more or less flat or at marginal growth at the moment, which we attribute to shifting the customer share away from sari-sari stores to our end consumers, which is good for our business. In terms of new O!Save stores, what areas we're targeting, we're looking at complete [indiscernible]. We grow organically, so we don't really want to jump to different areas. So we try to grow our existing regions, but we expand across. Increased intensity, we don't really see that at the moment for us. The intensity for new store sites has remained relatively the same compared to the previous years.

Again, just a reminder for the audience, if you have follow-up questions, please send them over. So we do have a follow-up from Paolo Garcia. Can you provide color on how the Food segment is performing for the month of April so far? Are we seeing the SSSG momentum continue from what we saw in the first quarter of this year?

It's actually in line with the Q1 performance.

Okay. Again, another one from the JPMorgan team. Do you see 5% SSSG for the Department store business sustainable for the rest of 2025?

Yes.

The answer is yes. The [indiscernible] team believes that this is sustainable for this year. Then -- sorry, department store, 5% SSSG is sustainable. Okay. We can see John Te raising his hand. Okay, John, please go ahead and ask your questions.

3 questions, 2 just [ clarifactory ]. First is, can we repeat the impact of the calendar timings, i.e., leap year and the impact of Holy Week? And I heard it was 4.4%. Was that an extra 4.4% boost? Or would the same-store sales have been 4.4%, if not for the calendar adjustment?

[indiscernible] 3.6% to 4.4%. It was 0.8% [ impaired ]., so an additional 3.6% for the 1 day.

Okay. And -- so that's for leap year. Would we have any comments on Holy Week? Because I think we have full trading days this quarter versus, I guess, less last quarter.

We need to see for the full year of April, so we can combine March, April versus March, April last year. You still have 1 day more to go.

Okay. For O!Save, did I hear Jonas correct in saying that we're targeting 1,500 stores in '26?

No, that's not correct. More than 1,100.

1,100. Okay. Last question for me. Any comments on election-related spending for 1Q, if not 2Q?

Not seeing any election spending.

Any particular reason why you think that might be the case this time around?

Depends on the locations. If there are more candidates running, then you'll see spending. But if there's none -- when I run around the provinces, actually, the incumbents are really the one that's running. No competition [indiscernible]. So no money -- no competition, no money.

We have a few more questions. This is from [ Nadeem ]. How do you see higher tariffs potentially affecting or impacting RRHI? Any changes in supplier sourcing given this backdrop?

Thanks for the question. We have not really seen any significant changes. But then again, we are also anticipating that it could potentially affect us positively with the possible growth in the market, I think we stand to benefit from it. We particularly buy a lot of American branded products. But then again, the vendors are very much willing to ship out of China. So that could also potentially improve our margins.

Okay. So at this point, there are no more questions coming in from the audience, and we can now end this call, sir.

Okay. Thanks, everyone. See you in the next call.

Thank you.